Blockchain 101: Getting Started with Smart Contracts
by Nicole Speciale
A day rarely goes by where I don’t come across the term “Blockchain,” either on the news, on the radio, or in passing. With the ubiquity of Blockchain and cryptocurrency talk, it is no surprise that many enterprises are feeling the urge to learn more about it, and even deploy a Blockchain pilot.
This post outlines key information and strategies to help your enterprise get started with Blockchain.
But First, What Exactly Is Blockchain?
To start, I’ll clarify that Blockchain and cryptocurrency (a digital form of money), while related, are not the same thing. Blockchain is a shared ledger that allows people and companies to participate in a transaction, or series of transactions. For a deeper dive into Blockchain, check out our research note on Blockchain and DTM.
And What Is a Cryptocurrency?
Cryptocurrencies can be used as a form of payment, either inside of a Blockchain transaction, or outside as a replacement of money/currency. Similarly, emails are sent via the internet. The email is the “application” that utilizes the internet to solve the problem of communications, as cryptocurrencies address the issue of secure and indisputable transactions/payments.
Three Main Blockchain Standards
Now, let’s talk about a few different approaches to Blockchain. Aragon outlines these in greater detail in the Blockchain and DTM note, but I will provide a SparkNotes version here. The three competing standards for Blockchain are HyperLedger, Ethereum, and R3/Corda. The first two can be either public or private, while R3/Corda is private.
1. HyperLedger is an Open Source approach to Blockchain, backed by companies such as IBM and Oracle. One of the benefits of HyperLedger is that it allows organizations to create their own forms of cryptocurrency, and develop Smart Contracts in virtually any language.
2. Public Ethereum is growing rapidly for Smart Contracts, and allows enterprises to be Decentralized Autonomous Companies (DAC), and create Distributed Applications. Private Ethereum has gained popularity with banks who are able to develop Blockchain networks and applications on this form of Blockchain.
3. The Corda Open Source platform is run by a privately-held company called R3. It is popular within the financial services industry, partly because many banks are investors in R3. Corda offers many Blockchain benefits, but more control since it operates on a closed platform.
Getting Started with Smart Contracts: Security Basics
Smart Contracts allow involved parties to develop, monitor, inspect, and enforce a contract and its terms. Agents or Bots are used to monitor these real-time, elastic contracts. If your enterprise is interested in deploying a Blockchain pilot for Smart Contracts, there are a few key things you should know. Aragon recommends leveraging Blockchain-based Smart Contracts, as they can be particularly useful for processes that require multiple parties or steps.
However, when it comes to Digital Signatures, PKI-based approaches are a safer bet than Blockchain offerings, which are unverified. The same goes for Digital Identity: current approaches are more trustworthy because they pose fewer security risks than public Blockchain options.
Getting the Most Out of Your Blockchain Pilot
Aragon recommends leveraging Blockchain’s embedded capability through the development of Smart Contracts. Pilot projects are a great way to understand how Blockchain best operates for your enterprise, and outside resources may be valuable for assisting IT Development.
The first key piece of your Blockchain pilot will be selecting which Blockchain platform to use, and it is important to fully understand the platform’s overall governance. When correctly implemented, Blockchain offers significant promise for the enterprise and the shift to digital transformation.